Report on Title - Residential Real Estate

Clauses

Part A: Climate risk and climate searches

[Drafting notes: 

• Assured shorthold tenancies: where there is an assured shorthold tenancy, report on the existence or absence of any climate provisions (see Toryn's Clause as an example).
• Report on title or engagement letter? Check your engagement letter or terms of reference. Wording already covered there need not be repeated in the report on title, but should be included where the engagement letter is silent.]

1. Impact of climate change on property: general information

Climate change is increasingly having a significant effect on real estate, not only through its physical impact such as increased flooding or subsidence, but also through transition risks (such as policy, legislative, regulatory or market changes made by governments or industries to respond to climate change). Such climate risks may affect the ability to insure, sell, rent out, develop or obtain a mortgage for a property, which can adversely impact its value or marketability, as well as the use and enjoyment of a property, possibly even in the short- to medium-term. 

The degree to which a property may be impacted in the future by climate risks will also depend on factors such as its location, how it was built, and its use. 

2. Climate searches: general information

A desktop climate search could help you to understand how climate change may impact the Property in the future. It can be a standalone search, or can be included within an environmental search. 

Unlike flood risk and environmental searches, which assess past and current risk, climate searches are forward-looking, and provide an indication of future risks posed by climate change. The search results are not guaranteed; they are limited by the data available and the quality of the models used to make predictions. However, they can provide useful information about potential risks, and investigations or advice you may wish to take.  

Solicitors are not qualified to advise on the physical risks of climate change, the technical, practical and financial consequences which may flow from them or whether further investigations are required (since this may relate to non-legal matters). We can, however, highlight certain steps you may wish to consider.

[Option 1: Client instructs solicitor to carry out a climate search]

3. Climate search results for the Property

We have obtained a climate search for the Property. [As we are also acting for your lender on this transaction, if a climate search is obtained (even if it was not originally required by your lender), we will need to report the results to your lender.] 

We wish to highlight the following [key findings from][opinion from the search provider on] the search results: [insert].

4. Recommended actions

If on review of the climate search results you have concerns about any of the risks referred to, there are a number of people that you can contact:

• Insurer or insurance broker: your insurer or broker should consider the terms on which insurance is currently available to cover potential losses associated with climate change. As part of the process of obtaining insurance for the Property, you should disclose a copy of the search to your insurer or broker. Climate risks may affect the availability of insurance cover and your broker should ascertain if the Property is likely to continue to be insurable at commercially reasonable rates for losses arising from or relating to these risks.
• Search provider: most search providers have a helpline that you can call. They may be able to answer your questions, or guide you to an appropriate expert.
• Technical experts: you may wish to consult an independent surveyor for advice on different types of surveys and reports. If you engage a surveyor, you should disclose a copy of the climate search to them. They may also provide recommendations on required resilience, readiness or adaptation measures that you may wish to consider. [Drafting note: see this UK Green Building Council bitesize explainer for an explanation of climate resilience, readiness and adaptation]. You should discuss any such advice with your lender or valuer prior to exchange in case there is an impact on the Property’s current or future value. 
• Valuer or lender: you may wish to engage an independent valuer rather than relying on your lender’s valuation report. An independent valuer can advise you on whether the matters raised in the search result are likely to impact the current or future market value of the Property. If you choose to engage one, you should discuss with them any impact on the current purchase price or the terms of your mortgage offer. [We also recommend providing a copy of the search result to your lender.] [We have already [provided a copy][reported on the results] of the search result to your lender, as they requested.] 

[The following organisations may assist in recommending suitably qualified professionals who can provide specialist surveys or investigations to better understand the impact of climate risks specifically associated with the Property:

• British Insurance Brokers Association (BIBA)
• Chartered Association of Building Engineers (CABE)
• Chartered Institution of Building Services Engineers (CIBSE)
• Chartered Institution of Civil Engineering Surveyors (CICES)
• Chartered Institution of Water and Environmental Management (CIWEM)
• Residential Property Surveyors Association (RPSA)
• Royal Institution of Chartered Surveyors (RICS)
• Society for the Environment (SocEnv).]

[Option 2: Client instructs solicitor not to carry out a climate search]

3. Climate search results for the Property

[We have not commissioned a climate search of the property, as you have informed us that [these searches have already been commissioned] [you are using separate advisers to carry out investigations in relation to environmental issues, or the impact of climate risks (including flood) on the property] [you do not want such a search to be obtained]. 

[Include where separate investigations - climate search or otherwise - have been undertaken by the client] You should mention any separate investigations to your prospective insurer, or insurance broker, who may wish to receive a copy. Insurers may consider any climate risk adaptation measures when assessing the coverage that they will offer. You may also wish to provide a copy to your valuer or lender.

[Include where no climate investigations are being undertaken by the solicitor or client] You confirm that you have read the information regarding climate risk and climate searches above in full and you do not wish to proceed with ordering a search or other investigations. You should consider carefully the consequences of your decision not to commission a climate search or consider other options for finding out how climate change may impact the Property. You accept that you have no recourse to us in respect of climate risk if the Property is exposed to risks associated with climate change and you proceed to purchase the Property without obtaining a climate search.

Part B: Energy Performance Certificates

Energy performance certificates: general information

Minimum energy efficiency standards (MEES) require a commercial or residential property which is rented out to have an energy performance certificate (EPC) rating of at least an E (where A is the highest and G is the lowest). If it has a rating of F or G (known as a 'sub-standard' rating), the landlord may be subject to penalties but there are certain exemptions and exceptions. [This may be relevant if you choose to rent out the Property, or part of it, in future.]

It is anticipated that the minimum energy efficiency standards will become stricter in the future, which may mean that an EPC rating that today does not attract a potential penalty may do so in the future. 

Energy performance certificates: the Property

The Property has an EPC rating of [●].

For properties with a rating of A to C: This rating will not currently attract potential penalties. However, you should still review the recommendations in the EPC report and consider whether you wish to undertake any works to improve the Property’s overall energy efficiency.

For properties with a rating of D or E: Whilst currently satisfactory, this rating could attract future penalties if the energy efficiency were to drop during your period of ownership or if Government proposals were to come into effect. You should review or seek professional advice on the recommendations in the EPC report and any potential costs of any required works to increase the EPC rating of the Property. You should discuss any potential impact on value with your valuer and lender. 

For properties with a rating of F or G: You may attract penalties if you rent out the Property or any part of it. You should:

• discuss any potential impact on value with your valuer and lender;
• review and seek professional advice on the recommendations in the EPC report and any potential costs of any required works to increase the EPC rating of the Property.